Trading news: avoid if you can!

News is the driving force in the Forex market. It is upon news release that the market takes a new direction or projects further in the same direction with high energy, which is what we technically refer to as volatility. However, trading news can be more damaging as we see below in the following points:

Impulsive increase in market volatility

Volatility is a key attribute to the market and sets price on the move hence we are able to execute our trades. However, too much volatility brings along shortcomings that only leads us to losses as Forex traders. The market moves in high swings and becomes very erratic that nearly none of price action rules is observed. At such instances price does not obey even the psychological zones of support and resistance. Since speculation is at play at such a moment every key player in the market jumps in, all at the same instance hence sending price in unprecedented directions to and fro. Obviously you cannot trade safely or even logically in such conditions as your judgment is already impaired.

Ruined state of emotions

Whenever you start your trade session you are required to be in control of your emotions. When you are in this state you can afford to remain calm and give sober judgment on probabilities of the market. This however, is not the state of affairs at the time when news comes out and you are watching the price chat. You get excited and completely drawn in by the sudden changes in price on the chart and your logic mind is rendered functionless at that point in time. If you had a live trade normally your hands will rest on your mouse, pointing at the Stop Loss or Take Profit levels and sometimes even adjusting these orders. Your breathing rate and pattern is already altered and so is your heart beat rate. Your thinking and judgment is already imprecise so you are ruined and cease operating like a professional trader.

Latency effect on the trader’s MT4 platform

At the time when news is on release, there is a high chance of platform failure. This effect results from the high traffic of orders to the platform servers as well as from the feeds about the market. The results are failure in stop loss orders and take profit orders and you cannot also place trades at that time. If you had running trades in this duration you might suffer instantaneous losses as your stops will get hit if price suddenly moves against your trades. Worst is if there are gaps in the price movement as your stop loss will count on the next opening after the gap, causing you unprecedented loss of margin.

If you are trading news you are simply gambling than trading. While your approach to trading Forex trading should be more of hunting for high probabilities, managing your emotions, maintaining a clear judgment on fundamental and technical analysis on the market, you do not have time for that when trading news. Generally you are not trading on logic but rather on impulse and perhaps on your emotions too.

While every trader wishes to nature their trading skills and grow their account margin, trading news kills this positive progress and in turn makes you just another gambler. In the long run the market catches up with you and takes a toll on your margin. Avoid trading news!

Categories: Tutorials

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